UPDATE 1-Synchrony to buy PayPal's U.S. consumer credit receivables portfolio

(Adds details on partnership, CEO comment, share movement)

Nov 16 (Reuters) - Synchrony Financial said on Thursday it would buy payment processor PayPal Holdings Inc's U.S. consumer credit receivables portfolio valued at $5.8 billion, as the companies expand their partnership.

Synchrony will also acquire about $1 billion in participation interests in PayPal receivables held by certain investors and a chartered financial institution, the companies said.

PayPal's shares were up 2 percent, while those of Synchrony Financial were up 3 percent in premarket trading.

Additionally, Synchrony Bank, a unit of Synchrony Financial, will become the exclusive issuer of the PayPal Credit online consumer financing program in the United States for 10 years.

"Our expanded relationship with Synchrony Financial will free up cash currently used to fund consumer credit receivables for other uses," PayPal Chief Executive Dan Schulman said in a statement.

The deal is expected to close in the third quarter of 2018, the companies said.

PayPal and Synchrony Bank have partnered to offer PayPal-branded consumer credit card options since 2004.

BofA Merrill Lynch is the financial adviser to PayPal, while Morgan Stanley & Co advised Synchrony Financial. (Reporting by Roopal Verma in Bengaluru; Editing by Sriraj Kalluvila)